Russia says it will cut oil production over Western price caps

An oil tanker is moored at the Sheskharis complex, part of Chernomortransneft JSC, a subsidiary of Transneft PJSC, the largest facilities for oil and petroleum products in southern Russia (AP)

Russia will cut oil production by 500,000 barrels per day next month in response to the West capping the price of its crude over the war in Ukraine, deputy prime minister Alexander Novak said, according to multiple Russian news media reports.

Mr Novak said in remarks carried on the Russian TASS news agency: “As of today, we fully sell all our crude output, but as we stated before, we will not sell oil to those who directly or indirectly adhere to the ‘price ceiling’.

“In connection with that, Russia will voluntarily cut production by 500,000 barrels a day. It will help restore market-style relations.”

International benchmark Brent crude rose 2.5% Friday, to 86.67 dollars per barrel.

An oil tanker is moored at the Sheskharis complex in southern Russia (AP)

The Group of Seven major democracies have imposed a 60 dollar-per-barrel price cap on Russian oil shipped to non-Western countries.

The goal is to keep oil flowing to global markets to prevent price spikes seen last year, while limiting Russia’s financial gains that can be used to pay for the war against Ukraine.

The cap is enforced by barring Western companies that largely control shipping and insurance services from moving oil priced above the limit.

Russia has said it will not sell oil to countries observing the cap, a moot point because Russian oil has been trading below the price ceiling recently.

However, the cap, along with an European Union embargo on Russian oil and lower demand for crude amid a slowing global economy, has meant that customers have been able to push for substantial discounts on Russian oil.